1. Field of the Invention
This invention relates to the field of document fraud prevention, and, particular, to documents equipped with a magnetic stripe.
2. Background Art
Travelers often resort to forms of payment other than personal checks hen traveling far from home. Many merchants do not accept personal checks from out-of-town or out-of-state customers because of the financial risk that the personal check will not be honored, i.e. the check will "bounce." The merchant may request further identification for the transaction, such as a driver's license number, but there is little accountability for a visiting customer. It is in the merchant's best interest to confine accepted forms of payment to forms of payment with a high likelihood of being honored.
Cash documents are a widely honored form of payment. Cash documents, such as currency in the form of printed bills and minted coins, are easily recognizable and readily exchangeable. Because the value of these cash documents is backed by the issuing agency, typically the national government, the merchant has a high degree of confidence in the value of the documents. Further, because the document is so widely recognized, the document is "self-identifying." No additional identifying documents are needed to establish or confirm the value of the document. The value is inherent in the document itself regardless of the bearer. This "self-identifying" nature is much preferred over the nature of personal checks, wherein the value of the check is determined by the unconfirmed value of an individual's account, and is therefore dependent on the bearer's identity. A personal check acts as a promise of a transfer of funds between two specified parties, and thus lacks the generic value of a cash document.
With regard to the interests of the customer/bearer, cash documents in the form of printed or minted currency pose a financial risk. Because the value of the currency resides in the document itself, and not in the bearer, lost or stolen currency is most often unrecoverable. For this reason, traveler's checks are often preferred to currency. A traveler's check is an internationally redeemable draft purchased in various denominations from a bank or traveler's aid company and valid only with the purchaser's endorsement (i.e. countersignature) against his or her original signature on the draft. The signing and countersigning process provides some protection from the fraudulent use of lost or stolen traveler's checks. Further, as a purchasing incentive, the issuing institution often provides for a refund of traveler's checks declared lost or stolen. Therefore, unlike currency, lost or stolen traveler's checks are recoverable for the bearer.
Traveler's checks are generic and self-identifying in nature because they do not require that a specific payee be identified, and the value of the traveler's check is established primarily by the check document itself. After a traveler's check is countersigned, the traveler's check is treated as a cash document. Traveler's checks are treated as cash documents because traveler's checks are backed by an established financial institution with high accountability relative to that for an individual traveler.
FIG. 1 is a flow diagram of how a traveler's check is used. In block 100, a purchaser visits an issuing institution, such as a bank or traveler's aid company, and purchases a traveler's check with a specified value. The purchaser pays for the traveler's check using cash, payment card, or other form of payment. It is not necessary for the purchaser to have an account with the issuing institution because the traveler's check is backed by the institution and not the purchaser. After receiving the traveler's check from the issuing institution, in block 101, the purchaser signs the traveler's check to provide the comparison model for the later countersignature. Barring forgery of the signature, endorsement of the traveler's check to establish the check document as a cash document is limited to the purchaser.
Decision block 102 refers to the time period after the purchaser first signs the traveler's check and prior to presentation of the traveler's check to another party, e.g. a merchant, as a cash document (encashment). If, during the time specified for block 102, the traveler's check is lost or stolen, then, as indicated in block 103, the purchaser informs the issuing institution of the loss or theft, and arranges for reimbursement or replacement. The issuing institution may then structure a list of reported lost and stolen traveler's check serial numbers for identification during check processing after encashment. If, during the time specified for block 102, the traveler's check is not lost or stolen, the traveler's check is presented as a cash document to a merchant or other party in block 105 at encashment, also referred to as a point of sale. Traveler's checks obtained through unlawful means (e.g. lost, stolen or counterfeit traveler's checks) as indicated in block 104 may also be presented as cash documents in block 105.
In block 106, the purchaser countersigns the traveler's check for visual verification by the merchant. If, in block 107, the countersignature does not match the original signature, the merchant refuses the traveler's check in block 108 on the grounds that the person presenting the traveler's check is not the original purchaser of the traveler's check. If, in block 107, the countersignature and original signature are a visual match, in block 109, the merchant accepts the traveler's check as a cash document. The countersigned traveler's check is then submitted to the merchant's bank for processing, and ultimately, to the issuing institution for an exchange of funds.
Problems with traveler's checks include theft, loss and fraud. Each check is signed upon purchase and is countersigned upon use. For the merchant taking the check, as long as the countersignature appears genuine, the check is honored as cash. If the merchant has doubts, the merchant may request some form of personal identification, though this is not the norm. In even rarer cases, the merchant may call the check issuing institution with the serial number of the check to determine if the check has been reported as stolen. Typically, however, the only manner in which the traveler's check is verified at encashment is by visually comparing the original signature and the countersignature. Because of this, the traveler's check industry suffers significant annual losses due to signature forgeries on lost and stolen traveler's checks.
As stated above, in block 103 of FIG. 1, the issuing institution may construct a list of lost and stolen traveler's checks in response to reported loss or theft. However, fraudulent use of these lost or stolen traveler's checks is often not detected until the traveler's check with its forged signature is processed back to the issuing institution and compared with the lost/stolen list, usually at least several days after encashment. Therefore, though the lost/stolen list aids in the discovery of the forgery and later investigation, the list does not necessarily prevent encashment of the traveler's check with the forged countersignature.
In addition to forged signatures, fraudulent transactions in traveler's checks also include the counterfeiting of traveler's checks. Duplicates of issued traveler's checks may be copied using state of the art color-copying methods, or original counterfeit traveler's checks can be printed. If the merchant does not call in the serial number of the counterfeit checks, the checks will be used undetected until presented to the issuing institution.
The traveler's check industry has developed several means for preventing counterfeit traveler's check activity. For instance, watermarks are used in the printing of traveler's checks to differentiate authentic traveler's checks from printed counterfeits. Also, various specialized inks and patterns are used to complicate the printing process beyond the abilities of most counterfeit printing and copying operations. Unfortunately, as copying technology improves, the capabilities of copying counterfeiters also improve. It becomes problematic for the traveler's check issuing institution to stay ahead of counterfeiting technology.
U.S. Pat. No. 5,044,668, granted to Wright, discloses a check checker system wherein a "CC.TM." check is equipped with a magnetic stripe or bar code along one edge of the document to store the bank number and customer account number. A swipe style reader, or an optical reader in the case of the bar code, reads the data from the stripe or bar code and provides the information to a programmed computer system. The computer system verifies the customer's credit in his account and transfers the funds to the merchant's account at the time of encashment. The account number identifies the customer's account to the programmed computer system, and it is the customer's account status that is queried. Therefore, the customer is required to maintain such an account with the issuing bank to use the "CC.TM." check. The "CC.TM." check is thus an internal bank transaction document rather than a cash document. Also, because the customer is issued more than one check with the same account number on it (i.e. the number on the check is not uniquely identifying), it is possible for a counterfeiter to print duplicate checks using the same account number. Such a counterfeit attempt would succeed under Wright if the unsuspecting account holder has sufficient funds in his account. The "CC.TM." check is therefore susceptible to fraudulent use.
U.S. Pat. No. 5,016,919, granted to Rotondo, discloses a bank check having two magnetic stripes applied to the rear surface. One stripe is placed along a bottom edge of the check away from a front endorsement region, and a second stripe is placed along a side edge away from a rear endorsement region. The magnetic stripes are run through a magnetic character reading device either lengthwise or edgewise. The dual stripes are used to provide redundant information in case of damage to either stripe, and for standard check processing as with MICR (magnetic ink character recognition) data.
U.S. Pat. No. 5,371,798, granted to McWhortor, discloses a system for enhancing detection of counterfeit financial transaction documents. A financial transaction document, such as a check, is provided with a first band of MICR encoded financial information in magnetic ink and a second band of non-magnetic information printed in specific locations either above or below the first band. A magnetic scan sensor is used to read the MICR information and an optical scan sensor is used to read the non-magnetic information. Both MICR and the non-magnetic information are used to differentiate between properly printed documents and improperly printed documents that do not employ this printing technique. McWhortor applies the reading of the two bands during check processing, which occurs after a purchase transaction has taken place.
U.S. Pat. No. 5,190,318, granted to Mantegazza, discloses a document with forgery prevention means. The document, e.g. a check, is provided with an indication-writing portion wherein a forgery may take place, such as where the payee is indicated. The indication-writing portion is provided with regions made of magnetic or magnetizable material spaced by magnetically blank regions, so as to provide a code which can be detected by a magnetic reading head. The magnetic or magnetizable material is erasable by chemical and/or mechanical action, thus providing evidence of tampering if an attempt is made to alter information in that region. Further, the destruction of the magnetic material is detectable by the magnetic reading head as a corruption of the code in that region.
U.S. Pat. No. 4,733,060, granted to Dono et al., discloses a check negotiation system using a check card with a magnetic stripe similar to a bank card. The check card is made out of plastic or hard paper. Characteristic information and the user's account number are stored on the magnetic stripe prior to distribution to the user for purposes of authenticating the check card. A portable check card drawing apparatus is used to write appropriate information, such as the amount of the check, onto the check card. A person receiving a check card may cash it at an ATM having an exclusive check card read-out apparatus. The check card is not a self-identifying cash document. No means are provided for the person receiving a check card to establish whether the check card is fraudulent prior to cashing of the check card at an ATM.
U.S. Pat. No. 3,363,917, granted to Gunderson et al., discloses an apparatus for providing an extended printing region for a document such as a bank check, wherein magnetic ink is used for duplicating an identification code that may have been rendered unreadable on the original check. The apparatus consists of a separate sheet of paper adhesively attached to the back of the check such that a portion of the paper extends beyond the bottom edge of the check. When the check is processed by the bank, the duplicate code on the extended portion of the attached sheet is read by the processing machinery instead of the unreadable code on the original check.
U.S. Pat. No. 3,676,644, granted to Vaccaro et al., discloses a multi-layered document, such as a payment card, having a magnetic stripe on an intermediate layer of the document to protect the magnetic stripe from abuse. To individualize the document, a bar code is imprinted over the concealed magnetic stripe to cause ridges of varying size. An electronic device is then used to detect the different magnitudes of the magnetic fields near the ridges to decode the information stored in the bar code. The magnetic stripe/bar code combination can be substituted with a bar code of magnetic ink printed on an internal layer of the document.
U.S. Pat. Nos. 4,092,526 and 4,146,664, granted to Beck, disclose a payment card having a magnetic stripe overlaying an optical data track. The magnetic stripe is opaque to visible light, but transparent to infrared radiation. A card reader including a magnetic read head and an optical IR read head is used to read both the magnetic and optical data tracks at once. The concealed optical data is then used to verify the authenticity of the card.
U.S. Pat. No. 4,455,484, granted to Whitehead, discloses an identification card with a magnetizable core. Magnetizable pairs located throughout the core are oriented to represent information. Dummy pairs are used to prevent counterfeiting. OCR (optical character recognition) data on the surface of the card is compared with the data from the magnetizable core to verify authenticity.
U.S. Pat. No. 4,542,286, granted to Golarz, discloses a reusable time card carrier with a magnetic stripe. The magnetic stripe contains employee identification, schedule, and time summary information. An imprintable time card is attached for a billing period and then replaced with a new imprintable time card at the beginning of the next billing period.
U.S. Pat. No. 4,588,211, granted to Greene, discloses a machine readable document wherein fluorescent ink is used to highlight data portions of the document for an optical scanner. The highlighted regions are coded according to function using OCR, magnetic ink, or a fluorescent ink omission format, such that a scanning machine may locate a specific field of interest.
U.S. Pat. No. 4,620,727, granted to Stockburger et al., discloses a reusable payment card body whereon adhesive magnetic stripes can be placed. By using removable magnetic stripes, the payment card body can be reused by replacing one magnetic stripe with another.
U.S. Pat. No. 4,621,188, granted to Stockburger et al., discloses a data card and data strip measuring means for providing secured access to a data bank. Only those cards with appropriate authorization are granted access to the data in the data bank.
U.S. Pat. No. 4,806,740, granted to Gold et al., discloses a method for authenticating or identifying an object on the basis of a repeatably sensible, random magnetic medium. A magnetic medium on an object or document is sensed to obtain a magnetic characteristic of the object. The magnetic characteristic is recorded in digital format on a magnetic stripe for comparison with the sensed magnetic characteristic when authentication of the object is desired.
U.S. Pat. No. 4,807,287, granted to Tucker et al., discloses a verification and identifying system similar to Gold et al. However, the system of Tucker et al. employs encryption and error correction.
U.S. Pat. No. 4,921,279, granted to Hanna, discloses a method for printing MICR data on a bank check correction sticker in an offset position such that a deep reader encounters the correction information prior to crossing over the covered erroneous information. The deep reader can therefore lock onto the correct information and tune out the erroneous information as noise.
U.S. Pat. No. 5,406,068, granted to Nusbaum, discloses an authorization card for the purchase of ammunition. The rigid card has ammunition and weapon identification information imprinted upon it, as well as encoded on a magnetic stripe. Purchase of ammunition is permitted only for the specified ammunition type and only if an accessed data bank indicates that the weapon is registered.